Having read lots of stuff about WP7S, the conclusion I have come to is this...
There will be two types of apps
1. Apps with no need to run in the background
2. Apps that do need to run in the background
Examples of type 1 are games, spreadsheets and word processors.
Examples of type 2 are IM apps like palringo, and music streaming services such as pandora.
What will happen is that when you develop an app, by default it will not have the rights to use the background APIs. In order to gain access to them and have an app run in the background, you'll need to ask Microsoft to provide the access and make it a type 2 app. Microsoft will only allow this if you can convince them it is necessary for the functioning of your app.
Type 1 apps will simply pause when the user switches away from them. They will remain in memory but will be unable to execute any code until the user switches back to them, whence they will resume execution. This will ensure the app cannot hog any CPU and cause the UI to stutter or slow down. This is definitely a good thing.
Type 2 apps are given access to particular APIs to allow them to, for instance, download updates or postings on IM systems. This will be strictly controlled and priority will always be given to the UI, again to ensure it remains smooth and responsive.
That's my take on what's going to happen, and we'll see if I'm right at MIX 2010 next month.
So your answer is - yes it will multitask but only when it is truly needed. Which to me is the best of both worlds. It will ensure a smooth user experience whilst still allowing background operations.